LEISURE LETTER (12/23/2014)

Today's Headline Story

MPEL – MPEL has repurchased about ~1.5% of its ordinary diluted shares outstanding (1.656 billion) in December so far. YTD, MPEL have repurchased ~2.2% of its shares. For all the transactions , see HERE.

Takeaway: At least the company feels the bottom is near

COMPANY NEWS

577.HK – Louis XIII said in an HKSE regulatory filing the slowdown in Macau's gaming revenue over the six months to September 30 was “primarily” caused by a decline in telephone betting.

Takeaway: Seems like a reach to us, since proxy betting only ceased at Wynn Macau and Sand China and is only a small portion of GGR.

PENN – Hollywood Casino Bangor will be open 24 hours a day between Dec. 26 and Jan. 3 as a trial run to determine whether a round-the-clock operation in Eastern Maine might be viable long-term. Normally, the casino, which has about 400 employees, closes daily at 3 a.m. and reopens at 8 a.m.

H – announced plans to offer free Wi-Fi at all Hyatt hotels worldwide, providing connectivity and convenience regardless of booking method or loyalty program participation. Free Wi-Fi will become available to Hyatt guests around the world in February 2015. Travelers will be able to access free Wi-Fi on an unlimited number of mobile devices or laptops in Hyatt-branded hotel guest rooms and social spaces.

Article HERE

Takeaway: Hyatt ups the WiFi game with free WiFi for all guests, not just loyalty members.

RCL - will retrofit 19 of its ships with advanced emissions purification (AEP) systems. Installation will begin on Jan 2015 with 13 RCI ships and 6 Celebrity ships. Most of the installations will take place between 2015 and 2017. Each installation will take ~8 months.

Takeaway: Expect more dry dock days in 2015

INDUSTRY NEWS

Corruption/austerity articles:

China started to probe into alleged corruption of Ling Jihua, a former senior aide to former president Hu Jintao. Ling is vice chairman of the Chinese People's Political Consultative Conference National Committee and head of the United Front Work Department of the CPC Central Committee. Ling is investigated for "disciplinary violations". Ling was demoted in September 2012 after sources said his son was involved in a deadly crash involving a luxury sports car.Article HERE

Hong Kong's Former Chief Secretary Sentenced for Corruption – Hong Kong's former chief secretary Rafael Hui was sentenced by the High Court on Tuesday to seven-and-a-half years for corruption and misconduct convictions. Hui was ordered to pay the government of the Hong Kong Special Administrative Region (SAR) a fine of 11.182 million HK dollars ( about 1.437 million U.S. dollars). Hui was convicted of five counts of misconduct and corruption, making him the highest-ranking official in Hong Kong's history found guilty of taking bribes. Article HERE

China's CPC Reprimands Officials in Austerity Sweep – November saw 7,308 officials reprimanded for violating the central government's austere working practice policies. The Communist Party of China's (CPC) Central Commission for Discipline Inspection (CCDI) issued its monthly report regarding its fight against extravagance, saying that those punished were involved in 5,699 violations uncovered last month. Violations included dereliction of duty; overseas travel and personal entertainment financed by public funds; negligence and lazy work practices; excessive spending on receptions, buildings and vehicles; extravagant weddings and funerals; and sending or accepting gifts, the CCDI said on its website. Article HERE

China Business Leader Investigated – Sun Zhaoxue, former general manager of China's top aluminum producer, is being investigated for allegedly accepting bribes. Sun, also former member of the Communist Party of China (CPC) committee of the state-owned enterprise Aluminum Corporation of China (Chinalco), has been placed under "coercive measures". According to China's criminal procedure law, coercive measures include summons by force, bail, residential surveillance, detention and arrest. The CPC Central Commission for Discipline Inspection (CCDI) announced earlier Tuesday that Sun had been expelled from the CPC and public office following its own investigation. The CCDI investigation found that Sun took advantage of his post to seek profits for others, asked for and accepted "a huge amount in bribes," and committed adultery.Article HERE

Macau Outbound Tourism Increase – The president of the Travel Industry Council of Macau, Andy Wu, expects Macau people to take 30 percent more tours abroad this holiday season than a year ago with Japan and South Korea as the most popular destinations among Macau tourists. Because the closely spaced public holidays in Macau between the handover anniversary and New Year fall this year on weekdays, many resident’s took extended holidays to more distant locations.

Deflation in Singapore – The Republic is experiencing deflation for the first time in five years as the consumer price index (CPI) went into negative territory, the first negative reading since December 2009. The CPI fell to -0.3% year-on-year in November, down from 0.1% in October, according to the Department of Statistics.

McCarran Airport Traffic in November – The Clark County Aviation Department on Tuesday reported 3.4 million passengers for the month, a 2.3% increase over November 2013. The number of international passengers increased 12.8% for the month to 279,860. For the year to date, passenger traffic is up 2.5% to 39.5 million and international travelers are up 12.8% to 3.1 million. Based on historical traffic patterns and trends, McCarran should surpass 42 million passengers in 2014 — more than the number recorded in 2013, but short of the 47.7 million reported in record-setting 2007.

FHFA | Completing the Trifecta, NHS | Muddling

Takeaway:FHFA accelerated to +4.4% in Oct from +4.2% in Sep. All three primary price series are telling the same (2nd deriv) stabilization story.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.

Today's Focus: November New Home Sales & October FHFA HPI

FHFA HPI

FHFA HPI accelerated to +4.4% in October from +4.2% in September. All three primary price series are now telling the same (2nd derivative) stabilization story.

November New Home Sales

New Home Sales were down -1.6% on both a MoM & YoY basis. Meanwhile, New Home Sales are up just +0.7% YoY on average YTD vs. the Jan-Nov period last year and at +438K in November they sit just above the TTM average of +434K. New Home Inventory was flat at +214K sequentially, and is up +15.7% YoY. Existing Home Sales continues to dominate with the EHS to NHS ratio still at 11.3x vs the long-term average of 8.6x. Note that in contrast to most demand measures (purchase apps, EHS, etc) the comps for NHS are actually (somewhat) hard over the Oct-Jan period with NHS averaging +449K and 13% YoY Growth.

About New Home Sales:

Each month the Census Department releases the New Home Sales report, which measures the number of newly constructed homes that have been sold in the month. The difference between the New Home Sales report and the Starts and Permits report is that New Home Sales only includes single family spec homes built and sold by builders, and does not include condos, apartments, or owner-built units. This is why New Home Sales typically run at roughly half the rate of Starts.

Joshua Steiner, CFA

Christian B. Drake

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12/23/14 10:52 AM EST

Call Today @11 | Detecting Deception Through Statement Analysis

“Statement Analysis is the most accurate way of determining if a person is lying in a verbal or written statement. A person cannot give a lengthy deceptive statement without revealing that it is a lie. This is because people's words will betray them.”

-Mark McClish, creator of the Statement Analysis method

HOW WE ARE USING STATEMENT ANALYSIS

Reading conference call/analyst meeting transcripts is a key part of the analyst’s job. We all use words to define our reality, and our choice of words can be revealing. The premise of Statement Analysis is that a person’s choice of specific words can reveal when there might be an attempt at deception. This Statement Analysis exercise looks exclusively at a company’s written and verbal statements. Using these hidden clues, we can dig deeper into a company’s public pronouncements for signals of potential concerns in a company’s reporting.

MARK MCCLISH BIO

In 1990, Mark was promoted to the position of Inspector/Instructor at the U.S. Marshals Service Training Academy located at the Federal Law Enforcement Training Center in Glynco, GA. He taught at the Training Academy for nine years serving as the lead instructor on interviewing techniques. He used this time to study deceptive statements and conduct research on deception. Based on his findings, he created the Statement Analysis techniques for detecting deception in a verbal and written statement. While assigned to the Training Academy Mark was also the lead defensive tactics instructor for the Marshals Service.

Mark retired from the Marshals Service in 2009 and started Advanced Interviewing Concepts. His company provides interviewing skills training and assists investigators in analyzing statements.

Early Look

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Call Today @11 | Detecting Deception Through Statement Analysis

“Statement Analysis is the most accurate way of determining if a person is lying in a verbal or written statement. A person cannot give a lengthy deceptive statement without revealing that it is a lie. This is because people's words will betray them.”

-Mark McClish, creator of the Statement Analysis method

HOW WE ARE USING STATEMENT ANALYSIS

Reading conference call/analyst meeting transcripts is a key part of the analyst’s job. We all use words to define our reality, and our choice of words can be revealing. The premise of Statement Analysis is that a person’s choice of specific words can reveal when there might be an attempt at deception. This Statement Analysis exercise looks exclusively at a company’s written and verbal statements. Using these hidden clues, we can dig deeper into a company’s public pronouncements for signals of potential concerns in a company’s reporting.

MARK MCCLISH BIO

In 1990, Mark was promoted to the position of Inspector/Instructor at the U.S. Marshals Service Training Academy located at the Federal Law Enforcement Training Center in Glynco, GA. He taught at the Training Academy for nine years serving as the lead instructor on interviewing techniques. He used this time to study deceptive statements and conduct research on deception. Based on his findings, he created the Statement Analysis techniques for detecting deception in a verbal and written statement. While assigned to the Training Academy Mark was also the lead defensive tactics instructor for the Marshals Service.

Mark retired from the Marshals Service in 2009 and started Advanced Interviewing Concepts. His company provides interviewing skills training and assists investigators in analyzing statements.

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